Creating a Budget

Do you know exactly where all of your money goes each month? Do you know how much money you have left to spend this month? Are you saving towards an emergency fund each month? If you answered -NO - to any of these it may be time to get your finances in order.

The first step to saving more efficiently is to keep track of what you spend and budget. There are many different ways to do this, try a few out and choose the system that works best for you. The key to saving more successfully is to find a system that works for you and to stick with it.

Step One: Keep Track of What you Spend

We pay for the items we need in many different ways - we spend cash, credit, debit, and we even auto-pay bills. It’s important to have a system in place to capture all this spending.

Luckily, there are digital tools to help you keep track of your spending. Look for free tools that will group all your spending in one place. Take a look at a couple months of spending. Total up everything you spent and divide your spending into large categories –housing, food, utilities, entertainment, shopping, savings, and everything else. Click here for a sample budget worksheet.

Step Two: Create Your Budget

Now you know where your money is actually going. But is it going where it should? Create a budget that you can stick to. Look at places you can cut back in order to pay down high-interest debt and save. Not sure where your money should be going? Check out our Budget Worksheet.

Step Three: Stick to your Budget

Putting together a budget is easy: the harder part is sticking to it. The key to this is to go back to step one and keep track of your spending. Each week, check your finances to make sure you are staying within your budget. You can do this by using a cash, or envelope system, for example having one envelope for the money you save. one for the money you spend, and a third for money you donate. You can also keep track with a software program, online financial management tool, or mobile app – or you can simply use pen and paper to keep track of your spending.

No matter how you do it, it’s important to find a system that works for you and stick to it.

Share Your Tip or Story

Eunice Diaz, a teacher in Colorado Springs, had been noticing a pattern. Despite the fact that she and her husband were “making good money,” they were spending their entire earnings and “were still struggling at the end of the month.”

You will not believe what it took to completely change my life. About three years ago, the HR Administrator of the corporation where I worked (as a temp with no benefits) forwarded an email to me. Fifteen seconds. One small act of kindness. That's it - that's all it took!

In 2004, Tonya Shelton was facing financial ruin. Barely making more than minimum wage and having lost her home to an unexpected family crisis, Shelton and her family were forced to live in a rundown hotel.